How Has the Rise of Remote Work Changed the Labor Market?

Petek (2026) examines how the rise of remote work has changed California’s labor market. Using the Current Population Survey, American Community Survey, and data on online job postings, he finds that remote work remains far above pre-pandemic levels. About 13 percent of California employees worked mainly from home in 2024, roughly triple the 2019 rate. The effects are concentrated in technology, finance and accounting, business and government operations, and sales and marketing. Since 2019, employment in these heavily remote occupations grew 7 percent in California versus 16 percent elsewhere nationally, leaving California with roughly 200,000 fewer jobs than if it had matched national growth.

Why This Article Was Selected for The Policy Scientist

The rise of remote work is important because it is changing the geographic relationship among workers, employers, wages, housing costs, and regional economies. Petek’s analysis is especially timely as remote work has stabilized well above pre-pandemic levels, potentially weakening California’s traditional advantage in attracting high-skilled workers. The CPS and ACS provide unusually strong, nationally comparable data, making the patterns relevant to other high-cost states and metropolitan areas. The report contributes by documenting substantial employment and migration changes rather than treating remote work primarily as a workplace practice. However, its methods are descriptive rather than causal. Future research using credible causal-inference designs would better establish whether remote work itself produced the observed employment and migration shifts.

Full Citation and Link to Article

Petek, G. (2026, May 6). The rise of remote work: Effects on California’s labor market. Legislative Analyst’s Office. https://lao.ca.gov/Publications/Report/5182

Central Research Question

The report examines how the large and persistent expansion of remote work following the COVID-19 pandemic has changed California’s labor market. Its central concern is not simply whether Californians continue to work remotely, but whether remote work has weakened the geographic connection between high-skilled employment and California. The analysis concentrates on four occupational groups in which remote work has become particularly prevalent: technology, finance and accounting, business and government operations, and sales and marketing. Together, these occupations employ roughly 2.6 million Californians, or about one-seventh of the state’s workforce.

The underlying economic question concerns geography. Historically, California’s technology and information-intensive industries benefited from geographic concentration, particularly in the Bay Area and Southern California. Employers located near specialized workers, while workers accepted California’s comparatively high living costs partly to gain access to its unusually strong labor market. Remote work potentially alters this equilibrium. Employers can hire nationally, and workers can obtain California-based employment without living in California. The report therefore examines whether the remote-work transformation coincided with slower employment growth and changing migration patterns among workers whose jobs can readily be performed remotely.

Previous Literature

The report places its analysis within a rapidly developing literature on remote work, migration, taxation, labor markets, and urban agglomeration. Hansen et al. (2023), for example, examine the prevalence of remote work across occupations, firms, and geographic areas. Their research provides an empirical foundation for understanding how remote-work opportunities vary substantially across jobs and locations.

Several cited studies address geographic mobility more directly. Bick, Blandin, Mertens, and Rubinton (2024) investigate the relationship between working from home and interstate migration, while Akan et al. (2025) examine what they characterize as the emerging geography of American labor markets. Boarnet et al. (2024) focus specifically on California, studying relationships among telecommuting, migration, traffic, and residential and employment locations in the Bay Area and Central Valley. Li and Su (2026) similarly investigate remote work and residential sorting.

The report also draws upon research concerning broader economic consequences. Liu and Su (2025) study how working from home may affect the agglomeration economies traditionally associated with cities. Agrawal and Brueckner (2025) examine state taxation in a work-from-home economy, while Agrawal and Stark (2022) consider the implications of remote work for progressive state income taxation. Bick, Blandin, Caplan, and Caplan (2025) address an important measurement issue by comparing evidence on working from home across six U.S. datasets. Collectively, this literature establishes that remote work can influence where workers live, where employers hire, and how economic activity is distributed geographically.

Data

The analysis relies primarily on two major federal household surveys: the Current Population Survey (CPS) and American Community Survey (ACS). The CPS provides monthly labor-market information and, beginning in October 2022, asks respondents whether they teleworked or worked from home during the previous week and how many hours they worked remotely. This permits the report to distinguish fully remote employees and to calculate the proportion of total employee hours performed remotely.

The ACS is a substantially larger annual survey containing detailed demographic, employment, and migration information. The report uses the ACS to identify employees who report that they usually work from home and to examine interstate and intrastate migration. Because the pandemic disrupted survey collection, the analysis generally excludes 2020 ACS estimates where data reliability is problematic.

A third source measures employer demand. Online job-posting data identify positions advertised as remote or hybrid, allowing comparisons among Bay Area employers, employers elsewhere in California, and employers nationally. Using multiple datasets is particularly valuable because worker residence and employer location are distinct concepts under remote work. The CPS and ACS primarily illuminate worker behavior, while job postings provide evidence concerning employers.

Methods

The report is principally descriptive rather than causal. It constructs longitudinal comparisons of remote-work rates, employment, wages, and migration before and after the pandemic and compares California with the rest of the United States. The analysis also separates heavily remote occupations from other occupations and compares trends across the four major occupational groups.

The researchers classify occupations according to observed remote-work prevalence and examine employment changes relative to a 2019 baseline. They also disaggregate California geographically, particularly distinguishing the Bay Area and Los Angeles area from the remainder of the state. Migration analysis compares the movement of workers in heavily remote occupations into and out of California before and after the pandemic.

The report additionally constructs counterfactual calculations to quantify California’s employment gap. These calculations ask how many heavily remote jobs California would have had if its employment had grown at the national rate and how much of that difference corresponds to changed interstate migration.

These methods establish important descriptive patterns but do not constitute a causal-inference design. The analysis does not employ random assignment, difference-in-differences, instrumental variables, regression discontinuity, or another strategy designed to isolate the causal effect of remote work from contemporaneous economic changes. Consequently, the results provide strong evidence about changes occurring alongside the remote-work expansion but more limited evidence that remote work alone caused those changes.

Findings/Size Effects

Remote work remains substantially more prevalent than before the pandemic. In 2019, approximately 4 percent of California employees worked mainly from home. That figure increased to 21 percent in 2021 before declining to 13 percent in 2023. By 2024, 13 percent still worked mainly from home—roughly three times the pre-pandemic rate. More recent CPS evidence likewise suggests stabilization rather than a wholesale return to offices: fully remote work among California employees was approximately 9 percent by early 2026.

The transformation is especially pronounced in particular occupations. Approximately 38 percent of technology workers are fully remote, compared with 31 percent in sales and marketing, 30 percent in business and government operations, and 24 percent in finance and accounting. Before the pandemic, more than 90 percent of employees in these occupational groups worked in person. At the pandemic peak, between 35 and 55 percent worked from home.

The most consequential finding concerns employment growth. Since 2019, California added approximately 160,000 heavily remote jobs, representing growth of 7 percent. Employment in comparable occupations in the rest of the United States increased by 2.6 million jobs, or 16 percent. Thus, heavily remote employment grew more than twice as rapidly outside California. Had California matched the national growth rate, the state would have had approximately 200,000 additional heavily remote jobs by 2024. Nearly 90,000 of these “missing” jobs were in business and government operations.

Migration patterns changed substantially as well. Before the pandemic, roughly 55,000 workers in heavily remote occupations moved into California during a typical year, compared with approximately 50,000 who left, producing a net annual inflow of about 5,000. In 2021, only about 43,000 moved into California while approximately 80,000 left, generating a net outflow of roughly 37,000.

The report estimates that reduced migration into California accounts for approximately one-eighth of the 200,000-job gap. Increased migration out of California accounts for approximately one-half. The remaining gap largely reflects employers hiring workers who already reside outside California. Employment weakness has also been concentrated geographically: heavily remote employment grew more slowly in the Bay Area and Los Angeles area than in less urban portions of California.

Conclusion

The report concludes that remote work represents a persistent structural change rather than a temporary consequence of the pandemic. Although remote-work rates declined after their 2021–2022 peaks, the subsequent decline has been modest, and remote work remains several times more common than it was before 2020. The transformation is particularly important for comparatively high-paying, information-intensive occupations that historically contributed to California’s economic strength.

The central implication is that employment opportunities have become less geographically tied to employers. California residents can leave the state while retaining remote employment; workers elsewhere can accept jobs with California employers without relocating; and California employers can recruit from a national rather than regional labor pool. These developments potentially reduce some of the economic advantages historically generated by California’s concentrations of skilled workers and employers.

The report consequently identifies several issues for policymakers: California’s ability to attract and retain remote workers, the suitability of existing workforce programs for workers displaced by national competition, and the taxation of income earned remotely across state boundaries. The evidence establishes a substantial change in California’s labor-market geography. However, because the analysis is descriptive, an important question remains unresolved: precisely how much of California’s relative employment and migration shift was caused by remote work itself rather than housing costs, industry-specific changes, broader migration trends, or other post-pandemic economic forces.